While many of the most popular exchange-traded funds (ETFs) seek to replicate an index's performance, other types of ETFs are built differently. Two examples include leveraged ETFs and inverse ETFs. Some investors look for funds that utilize both the leveraged and inversed ETF trading strategies. If you count yourself among them—or just want to learn more about these products—keep reading for an overview and a list of leveraged inverse ETFs.
- Intended for advanced investors with very high risk tolerances, leveraged inverse ETFs combine two types of ETFs.
- These ETFs use leverage (though shorting or debt), inverse index tracking, and complicated securities to create gains when the index it tracks is falling.
- There are several leveraged inverse EFTs available from popular brokers for high risk investors to choose from.
What Is a Leveraged Inverse ETF?
As the name implies, a leveraged inverse ETF combines two ETF high-risk trading strategies—leveraged ETFs and inverse ETFs. It's best to tackle each concept separately to understand how they work together.
Whereas a traditional ETF seeks to replicate the performance of an index, a leveraged ETF seeks to beat an index by earning multiples on the index's performance. For example, the ProShares Ultra S&P500 (SSO) tries to double the earnings of the S&P. If the S&P gains 1% on a given day, SSO would theoretically gain 2%.
Inverse ETFs try to achieve the opposite performance of an index. In other words, it is a bearish investment that replicates a short position on an index. An example of this is the ProShares Short S&P500 (SH), which strives for a ratio of 1 to -1 with the S&P 500. If the S&P 500 loses 1% one day, SH would theoretically gain 1%. When an ETF seeks multiples on a short position, it becomes a leveraged inverse ETF.
Whether you're talking about leveraged, inverse, or leveraged inverse ETFs, it's important to remember that all of these products are for advanced investors who are comfortable with higher levels of risk.
Unlike traditional ETFs, holdings in these ETFs vary dramatically and can include complicated securities such as swaps and futures. It's important to research any ETFs that strike your interest, consider the risks, and have a plan for how the ETF will fit into your overall investment portfolio.
Leveraged Inverse ETFs
Below are several leveraged inverse ETFs available for your portfolio. Indexes tracked here range from biotech to Treasury bonds to the Chinese yen. As with any investment, it's best to do further research and consult your financial planner before buying any of these investment products. These ETFs seek -2x and even -3x returns of the underlying index for a single day.
- BIS: ProShares UltraShort Nasdaq Biotechnology ETF (-2x)
- BZQ: ProShares UltraShort MSCI Brazil Capped ETF (-2x)
- DRIP: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull and Bear 2x Shares ETF (-2x)
- DRV: Direxion Daily Real Estate Bull and Bear 3x Shares ETF (-3x)
- DUG: ProShares UltraShort Oil & Gas ETF (-2x)
- DXD: ProShares UltraShort Dow30 ETF (-2x)
- EDZ: Direxion Daily MSCI Emerging Markets Bull and Bear 3x Shares ETF (-3x)
- EEV: ProShares UltraShort MSCI Emerging Markets ETF (-2x)
- EPV: ProShares UltraShort FTSE Europe ETF (-2x)
- ERY: Direxion Daily Energy Bull and Bear 2x Shares ETF (-2x)
- EUO: ProShares UltraShort Euro ETF (-2x)
- FAZ: Direxion Daily Financial Bull and Bear 3x Shares ETF (-3x)
- FXP: ProShares UltraShort FTSE China 50 ETF (-2x)
- GLL: ProShares UltraShort Gold ETF (-2x)
- JDST: Direxion Daily Junior Gold Miners Index Bull and Bear 2x Shares ETF (-2x)
- KOLD: ProShares UltraShort Bloomberg Natural Gas ETF (-2x)
- LABD: Direxion Daily S&P Biotech Bull and Bear 3x Shares ETF (-3x)
- PST: ProShares UltraShort 7-10 Year Treasury ETF (-2x)
- QID: ProShares UltraShort QQQ ETF (-2x)
- SCO: ProShares UltraShort Bloomberg Crude Oil ETF (-2x)
- SDOW: ProShares UltraPro Short Dow30 ETF (-3x)
- SDS: ProShares UltraShort S&P500 ETF (-2x)
- SKF: ProShares UltraShort Financials ETF (-2x)
- SOXS: Direxion Daily Semiconductor Bull and Bear 3x Shares ETF (-3x)
- SPXS: Direxion Daily S&P 500 Bull and Bear 3x Shares ETF (-3x)
- SPXU: ProShares UltraPro Short S&P500 ETF (-3x)
- SQQQ: ProShares UltraPro Short QQQ ETF (-3x)
- SRS: ProShares UltraShort Real Estate ETF (-2x)
- SRTY: ProShares UltraPro Short Russell2000 ETF (-3x)
- SVXY: ProShares Short VIX Short-Term Futures ETF (-0.5x)
- TBT: ProShares UltraShort 20+ Year Treasury ETF (-2x)
- TTT: ProShares UltraPro Short 20+ Year Treasury ETF (-3x)
- TWM: ProShares UltraShort Russell2000 ETF (-2x)
- TYO: Direxion Daily 7-10 Year Treasury Bull and Bear 3x Shares ETF (-3x)
- TZA: Direxion Daily Small Cap Bull and Bear 3x Shares ETF (-3x)
- YANG: Direxion Daily FTSE China Bull and Bear 3x Shares ETF (-3x)
- YCS: ProShares UltraShort Yen ETF (-2x)
- ZSL: ProShares UltraShort Silver ETF (-2x)
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.